Renault-Nissan finalised a long-awaited deal to take control of Lada-maker AvtoVAZ as it looks to snatch market share from rivals in Russia by taking the boxy cars upmarket for a rising middle class.

Carlos Ghosn, leader of the Franco-Japanese alliance who was in Moscow to sign the agreement, said the deal deepens a four-year partnership it has had with AvtoVAZ, hoping to tap demand for new cars from Russians with growing incomes and rising aspirations.

Reviving the Lada brand - still Russia's market leader – is a top priority for Ghosn, who says it is expected to lead the group's growth plans. AvtoVAZ only survived a 2009 slump with the help of a state bailout and its clunky saloons, with a reputation for breaking down, are often the butt of jokes. "Without any doubt, the Lada brand will be in the short term and the long term the largest brand in Russia for the alliance," Ghosn told Reuters. "We are here to strengthen the brand and give it everything it needs."

Ghosn said he wanted Lada to be competitive at the bottom end of the market but also wanted to move the marque into higher price brackets. Two new Lada models, the Largus and Granta, have already attracted high demand and the company is still trying to deliver six months' worth of orders, the group said.

Ghosn expects the newly-created venture to capture 40 percent of Russia's market by 2016, up from 30 percent, as Renault-Nissan contributes technology and product knowledge to Lada while benefiting from AvtoVAZ's manufacturing base. "Russia is poised to become the largest auto market in Europe by 2015," Ghosn told a news conference on Wednesday. The group will be competing against several foreign makers which have been investing in Russia, such as General Motors, Ford, Fiat and Volkswagen.

SALES RISE

Russia's car market has been growing rapidly on the back of a rise in disposable incomes and an expansion of the country's middle class, to between 15 and 30 million from just 1 million in 1999, according to recent research by Sberbank. Car sales in Russia grew 40 percent last year to more than 2.6 million vehicles, recovering most of the ground lost after halving in the post credit-crunch slump of 2009. Growth has been flattening out, but overall sales for the year look set to reach around 2.9 million and Ghosn expects yearly sales to reach 4 million at some point